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The advent of artificial intelligence (AI) is one of the top technology stories in recent years. Not surprisingly, AI has also permeated public policy discussions, especially with the U.S. and China each putting forth plans to address the future of this technological revolution. The race is on to lead the world in AI innovation, and a panel of experts at NOW 2018 offered insight on the competitive dynamics between the two global superpowers driving progress in AI.

The U.S. has led AI research out of the gate, with its national focus on entrepreneurship and the startup infrastructure afforded by Silicon Valley and other innovation hubs. Nick Zhang, founder and CEO of the Wuzhen Institute, a China-based think tank, shared insights on the geographic dispersion of AI development thus far. Zhang presented data on three key indicators—AI company headquarters, AI patent filings and AI venture capital (VC) investment—to show that the U.S. has commanded the majority of AI activity over the past two decades. Notably, between 2000 and 2016, U.S.-based companies received more than 70 percent of total worldwide venture funding in the AI sector. But the activity gap has narrowed over the past five years, and a growing number of startups, patent filings and VC dollars are now driven by Chinese innovation.

Although the first stages of AI’s evolution have emanated from the West, China’s state-sponsored goal to lead the AI market by 2030 has accelerated research initiatives throughout Asia. Elsa Kania of the Center for New American Security specializes in Chinese defense innovation and emerging technologies. She highlighted the Chinese government’s role in the country’s pursuit of AI advancement; the government already has taken steps in terms of implementation, allocating data resources to startup companies with test-phase algorithms and establishing fully funded AI research laboratories. China’s proactive steps are particularly notable at a time when U.S. STEM (science, technology, engineering and math) funding is steadily declining—a dynamic that potentially opens the door for China to gain ground on the AI innovation front.

Keys to advancement in AI include the development of new algorithms, affordability of computational power and access to actionable data. Both countries have unique resources that offer competitive advantages. Today, the U.S. university system leads the field in algorithm research and, according to Zhang, is on the verge of computational processing innovations that will become the global gold standard. However, the U.S. faces a potentially insurmountable challenge in the form of China’s structural advantage relating to data collection. With a population of mobile and internet users more than triple the size of that of the U.S., China is fundamentally better positioned to collect actionable data for new AI applications.”

While a competition pitting two world superpowers against each other makes for good headlines, neither country is likely to dominate all AI disciplines. Investors may benefit from the research race we see today, which is likely to boost research funding on both sides and potentially accelerate breakthroughs in the field. As long-term investors with exposure to innovation centers in the private markets, Brown Advisory seeks investments that can benefit from the disruption potential of AI advancement. Almost all of the VC firms in our portfolio have invested in AI-driven companies, and we expect that trend to continue as AI grows more ubiquitous on a global scale. Sharpened by both the U.S. entrepreneurial ecosystem and China’s robust state-sponsored asset dedication, we expect AI innovation will occur at an increasingly rapid pace, yielding new technologies, social implications and investment opportunities in the years to come. 




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